Director Overboarding: Global Trends, Definitions, and Impact

JULY 19, 2019

In the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company boards faced significant opposition to their elections. The idea that directors should not serve on too many boards has been a key consideration for investors for many years. The main concern for investors and companies focuses on the ability of directors to fulfill their responsibilities given the significant time commitment associated with each directorship; and as corporate governance and investment stewardship standards evolve, so does the definition of an overextended director.

In the following paragraphs, we explore varying definitions of overboarding, and we review emerging trends in investor sentiment, as demonstrated by significant votes against directors who serve on more than four boards. Finally, we examine the link between overboarding and company performance, and we find evidence of underperformance among companies with overboarded directors or executives on their boards.

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